Barclays PLC

LSE:BARC

Earnings Call Transcript 2022-Q1

[Operator]

Welcome to the Barclays Q1 '22 Analyst and Investor Conference Call. I will now hand you over to CF Venkatakrishnan, Group Chief Executive; and Anna Cross, Group Finance Director.

[Coimbatore Venkatakrishnan, executive]

Good morning. I am pleased to report a strong first quarter for 2022 for Barclays. Our strategy is delivering and we saw income growth in all 3 of our main operating businesses.

Group income was up 10% to GBP 6.5 billion for this quarter. Profit before tax was GBP 2.2 billion, and group return on tangible equity was 11.5%. This comes after absorbing an increase in costs, and that increase was driven in particular by the remediation of the legacy portfolio as well as an over issuance of securities in the U.S., something which I will talk about in a moment.

Our group income has benefited from broadly improved performance in our consumer businesses, Barclays U.K. and Consumer, Cards and Payments assisted by rising rates. Global Markets has also performed well as we helped clients navigate the volatility of the first quarter, both before and after the appalling invasion of Ukraine.

Unsecured lending balances remain well below pre-pandemic levels and impairment was GBP 141 million for the quarter. We remain well capitalized with a CET1 ratio of 13.8%, comfortably within our target range of 13% to 14%.

Before Anna and I continue talking about the highlights of our quarterly performance, let me start by addressing 2 matters. The first is the over issuance of securities in the U.S. and the second is our exposure to Russia. As part of our Structured Products business, Barclays is a frequent issuer of structured notes and exchange-traded notes in the U.S. as well as elsewhere.

In March, we identified that the securities offered and sold under our U.S. shelf registration statement had exceeded the registered amount for a period of about a year. As a result, we will be conducting a recession offer to eligible purchases of these affected securities. Details of this will be published in due course.

The quantum of the pretax loss due to this recession is about GBP 500 million. Anna will take you through the impact on our financial statements, including the allocation of these losses between 2021 and the first quarter of 2022. This situation was entirely avoidable, and I'm deeply disappointed that it occurred.

The necessity of a strong controls culture has never been clearer to me. In fact, we have made considerable progress improving our controls since 2016, and so the fact that this happened is particularly upsetting. I have commissioned an external review of the matter with oversight from the Board, and this review is focused on what happened, how it could have happened and where accountability lies. At the same time, I take some comfort from our response and our ability to absorb this issue financially.

The matter was escalated immediately, both internally and to our regulators, with whom we are cooperating constructively. To date, we have not found any evidence of intentional misconduct. And having reviewed all our other issuance programs, we note that they're all within applicable limits. However, the fact that this over issuance occurred reflects the weakness in our control environment, and we are taking steps to address this.

We're also enhancing the internal controls in relation to our debt securities issuance activities as an extra safeguard. In view of our ongoing discussions with the SEC concerning the impact of this issue, we are delaying the execution of our stock buyback until these discussions have concluded. This is not a question of whether we will be proceeding with this buyback, but when we will be proceeding.

Our capital position is strong as reflected in the results we have just received, and we expect to be in a position to proceed with the buyback towards the end of the second quarter. Let me now turn to Russia.

We have been witnessing a horrific human tragedy unfolding in Ukraine over the last few months. The human element of the conflict is what we feel first and foremost. We have also been dealing with the market repercussions. Barclays itself has no onshore presence in Ukraine or in Russia, following our exit there some years ago. The exposure we do have to Russia is principally through the facilitation of client activities in the Corporate and Investment Bank.

As illustrated on the slide, though, we reduced this exposure significantly through the quarter, and we have managed to control it carefully. We know that we need to remain vigilant to protect the group from second and third order risks, which includes cyber treats. We are, of course, working closely with governments and regulators around the world to comply with sanctions.

Turning now to some of the highlights of the quarter. I'd like to start first and talk briefly about the strong performance of our market franchise. Global Markets income has been notably higher since 2020. This has been driven by a number of factors, including what is happening externally in the marketplace as well as the result of a number of strategic decisions, which we have made over time.

To begin with, the franchise is benefiting from the ongoing growth of the global capital markets themselves. Our margins have also improved, reflecting the higher level of market volatility that we have experienced since the start of the COVID-19 pandemic.

We have also benefited from competitor exits in some of the product areas where we have made strategic investments, including in our equity plan financing business. But many of the drivers of our success also results from the positioning of our business, including the investments which we have made in our client offering and the digitization of our platforms.

As I mentioned at year-end, we have also taken steps to diversify our income streams, improving the consistency of our performance, especially during changing market conditions. We have grown our financing income by approximately 40% between 2018 and the end of 2021. And in fact, in the first quarter of 2022, that income growth continued, up around 10% on the previous quarter.

So our Global Markets business is growing in strength and capability. However, as I said to you in the previous quarter, this growth will not always be monotonically in a straight line. Our relative performance will be stronger in some quarters than in others.

For instance, in Q4 of 2021, we underperformed our competitors. While in Q1 of 2022, our performance has been particularly strong versus our competitors. This relative performance is determined by 3 things.

The first is the businesses in which we engage. The second is the strength of our interaction with clients. And the third is particular idiosyncratic opportunities in which we have helped clients manage their exposures.

In Q1 of 2020 -- 2022, all these 3 factors contributed to increased revenue. As I've already outlined, our business mix means that we have relatively limited direct exposure to Russia and to the commodities market. We have managed the exposure which we do have proactively and dynamically.

Q1 also saw increased trading activity commencing with rising interest rates in January and February and increasing after the invasion of Ukraine. Thanks to the strength of our client franchise, we were able to help many clients manage their risks and exposures during this period, responding to rising risks and fluctuating equity prices. We were also able to help a number of important clients manage very large currency and debt exposures related to Russia.

In summary, the investments we have made over the past few years in this business are now delivering, positioning us to continue to serve our clients when they need us most. Turning now to the economic environment. Rising interest rates at both the short term and the long end of the yield curve are leading to higher net interest margins for the bank.

We are already starting to see some of the benefits from rises in the base rate flow through to our customer businesses -- consumer businesses. However, both the U.K. and the U.S. economies, while they are forecast to continue growing over the next 3 years, faced a stretch from rising inflation.

One compensating aspect is that unemployment in the U.K. and the U.S. remained at low levels. We are very focused on the impact that higher prices are having on our customers and our clients, a great many of facing far harder conditions this year as a result of inflation, particularly from supply chain difficulties and higher energy costs. We will support those who bank with us to navigate this difficult period wherever we can, and we will continue to support the wider economy just as we did through the COVID crisis.

We remain focused on our 3 strategic priorities, which are outlined at year-end. The first, to deliver next-generation digitized consumer financial services. Second, to produce sustainable growth in the Corporate and Investment Bank. And third, capturing opportunities as we transition to a low carbon economy.

Across our Barclays U.K. and Consumer, Cards and Payments businesses, we are continuing to invest in our digital capabilities to enable our customers and clients to transact and interact digitally. We are building out more cost-effective infrastructure using consumer data more effectively, and we have invested to grow our payments business.

Within wholesale banking, we are investing to sustain our position as the sixth ranked global investment bank. This will allow us to continue to take advantage of the growth in capital markets and to help our clients manage risk, as you have seen in the results this quarter.

As I've already touched on, we have also sourced to diversify our income in the Corporate and Investment Bank, including by investments in more consistent annuity type financing businesses in Global Markets. We are also targeting growth in transaction banking and our corporate banking offering in Europe.

Finally, our third priority is to recognize the scale of opportunity in climate-related financing and to realize it. We want Barclays to be able to benefit as we support our customers and our clients to transition their businesses and their activities towards lower carbon emissions. Helping finance this transition is a key part of our strategy to become a net 0 bank by 2050.

We are well underway to reach our target to facilitate GBP 100 billion of green financing by 2030 having already facilitated over GBP 65 billion. We also recently announced important updates to our climate strategy, targets and progress, including our work to reduce our finance emissions. We have set 2030 reduction targets for 4 of the highest emitting [indiscernible] in our portfolio and further tightened our restrictive policies with respect to the financing of thermal coal.

As part of our commitment to give shareholders a say on climate, we are offering our shareholders a vote on our climate strategy, targets and progress at our Annual General Meeting in Manchester next week. In conclusion, we had a strong quarter. This is despite the over issuance of securities in the U.S., which was a disappointing controls matter and has impacted our costs.

We have maintained a double-digit group return on tangible equity that was a feature of our performance throughout 2021, and I am confident in our ability to sustain this on an ongoing basis and we continue to target an RoTE of greater than 10% in 2022.

As I've already mentioned, we will be proceeding with our planned GBP 1 billion share buyback program, and we expect to be in a position to do so towards the end of the second quarter. Thank you, and over now to you, Anna.

[Angela Cross, executive]

Thank you, Venkat. Good morning, everyone. You will have seen our announcement about over issuance of securities in the U.S. a few weeks ago. At the time, we expected the Q1 results to reflect circa GBP 0.5 billion of litigation and conduct costs pretax in respect of this.

Following subsequent discussions with regulators, we have apportioned GBP 0.2 billion of these estimated costs to 2021. We also have GBP 0.2 billion of customer remediation relating to a legacy partner finance portfolio in CCP, which we weren't expecting at the time of our full year results. I'll highlight the effect these charges have on Q1 as we go through the presentation. I'll start with a summary of our Q1 performance.

Overall, we continue to focus on delivery of our 3 targets for RoTE, the cost/income ratio and CET1. RoTE for the quarter was 11.5% despite the impact of the litigation and conduct costs with both Barclays International and Barclays U.K. delivering double-digit returns.

Our cost/income ratio was 63%, elevated by the level of L&C costs in the quarter. However, operating costs were broadly flat against income growth of 10%, demonstrating the operating leverage of the businesses and our cost discipline. The CET1 ratio ended the quarter at 13.8%, comfortably above the midpoint of our target range. This capital print includes the impact of the GBP 1 billion share buyback program announced with full year results.

Overall, we delivered a PBT of GBP 2.2 billion and 8.4p of EPS. I'm going to focus on income, cost and impairment trends across the group before I briefly summarize the results of the individual businesses.

Income was 10% higher than Q1 2021, with all the businesses contributing. CIB delivered growth of 10%, demonstrating the diversification within the CIB and its ability to deliver attractive returns in a variety of macroeconomic environments. Markets income increased 26%, and this reflects the high level of activity by our clients as we help them reposition in the light of geopolitical uncertainty and rising rates.

FICC revenues were up 37%, reflecting increased volumes and attractive bid offer spreads in volatile markets. Equities revenues were GBP 1 billion, up 13% year-on-year with particular strength in derivatives. Quarterly comparisons of market income are affected by various factors, and our Q1 year-on-year increase does benefit from our business mix.

But as we look at the development of our markets income over multiple quarters, we are pleased with the development of our franchises on a trend basis. One example is financing activities, which performed well within FICC and equities with increased balances and healthy spreads.

Balances in equity prime were up 14% year-on-year, evidencing our successful expansion of that business over the last few years. Investment banking fees were down 25% year-on-year, reflecting lower primary issuance volumes particularly in equity capital markets. Debt capital markets income was down just 8%, outperforming the market, whilst advisory was up and the deal pipeline remains strong.

Income in CCP increased 10%, reflecting growth across all 3 constituent parts. In international cards, U.S. balances grew by 13% or $2.6 billion year-on-year, although there was, of course, a seasonal decline during Q1. Given this, we are confident of delivering balance and income growth in 2022, both organically and with the acquisition of the GAP portfolio, which is due to complete towards the end of Q2.

However, the income effect of this balance growth will be dampened by the J-curve effect, particularly from customer acquisition in growing portfolios like American Airlines and JetBlue.

In the payments business, despite Omicron-related restrictions in January, transactions turnover was up 17% year-on-year, contributing to an increase in income of 44%. The private bank franchise is developing well with income up 20% year-on-year as client balances continue to grow in both banking and investment products.

Barclays U.K. grew income by 5%, predominantly driven by Personal Banking, where income was up 11% year-on-year. This reflected the strong origination of mortgages throughout 2021, which continued into Q1 2022 with a further GBP 1 billion of net balance growth. Whilst the mortgage market is always very competitive, Personal Banking margins have increased overall due to the impact of rising rates on deposit income.

Barclays Cards U.K. income fell by 12% year-on-year. Although spend levels have increased by 35%, balances were down year-on-year and fell GBP 0.3 billion in Q1 because of seasonality and elevated repayment rates. We do expect Q1 to be the low point for U.K. card balances with spend recovery generating some growth in lending balances from here.

Although recovery in interest earning balances is expected to remain slower.

Finally, to pull out some key income themes across the group. Loans and advances have grown year-on-year by 7%, more than matched by deposit growth of 10%. Whilst the market environment for primary issuance has been challenging, that same environment has driven high levels of client activity across both financing and trading in the CIB's markets business.

Increased economic activity has driven transactional fees across consumer and corporate businesses. And lastly, of course, there is a tailwind from rising interest rates, which impact product margins across our franchises, but also income from the structural hedge. We expect this effect to be more meaningful in coming quarters, and you'll find our usual slide on sensitivity to rate increases in the appendix.

Looking now at costs. The cost performance this quarter is, of course, dominated by the L&C charges. We manage our statutory costs, and we're not going to adjust all our performance metrics to exclude L&C. However, we do view this quarter's L&C as exceptional, so we focus particularly on the trends in operational costs. These were broadly flat as we exercised good cost discipline and delivered strong positive jaws. Base costs, which exclude structural cost actions and performance costs, were up by GBP 0.6 billion, mainly due to the GBP 0.5 billion increase in L&C.

The Q1 allocation of costs relating to the over issuance of GBP 0.3 billion is charged to the CIB, and the GBP 0.2 billion relating to our legacy partner finance portfolio is in CCP. Looking now at the cost trajectory for the year. When we set our guidance for base costs for the year, we didn't anticipate L&C costs of GBP 0.5 billion in Q1.

There has also been some increase in expectation for inflation, and the dollar has strengthened further since full year results. So we have seen some increase in our outlook for all-in costs for the year.

Efficiency and cost discipline remains crucial, and we continue to seek to balance capacity creation with investment for growth. We are reviewing expenditure plans in the light of the expected cost of L&C for the year and the impact of both inflation and FX and may postpone some investment programs.

As we mentioned at full year, based on current plans, we would expect structural cost actions to be materially lower than last year's total of GBP 0.6 billion. You will appreciate that there are a number of moving parts this early in the year, but I'm currently comfortable with the published market consensus of around GBP 15 billion for all-in costs this year.

Moving on to impairment. We reported a modest charge of GBP 0.1 billion for the quarter. This is Stage 3 impairment relating to net charge-offs and some expected migrations through the impairment stages as economic activity recovers. Delinquency rates in the businesses are stable at low levels with 30-day arrears in U.K. cards at 1% and U.S. cards at 1.6%. And whilst we are seeing some recovery year-on-year in unsecured lending, balances are well below pre-pandemic levels. We are tracking customer and client behavior very carefully, including patterns of spending in order to identify early signs of pressure from affordability.

So far, we haven't seen any particular worrying indicators, but we have specifically considered affordability risks and have broadly maintained coverage levels with U.K. cards at 12.8% and U.S. cards at 10.4%. Further details on coverage ratios are included in the appendix.

Turning now to the performance of our business. The U.K. income increased 5%, while costs decreased 3%, reflecting lower operational costs plus efficiency savings, partially offset by increased investment spend. We have started to implement the cost actions we reflected in the Q4 result, but it will be a while before we see the full expected benefit given the timing and payback.

The BUK RoTE was 15.6%, and we're feeling good about the momentum in the business. Finally, a few words on forward margin expectations for the U.K. The NIM for the quarter was 262 basis points, up 13 basis points on Q4, principally reflecting the effect of rate rises. There is still a lot of variables. But given the pass-through on the initial rate rises and the expectation of further rises, we're increasing our NIM guidance for the full year to 270 to 280 bps. That assumes the U.K. base rate reaches 1.75% by the end of the year.

Turning now to Barclays International. BI income increased 10% to GBP 4.8 billion, while costs increased as a result of the conduct and litigation charges. Despite this, Strong business performance delivered a RoTE of 14.8%. I'll go into more detail on the next 2 slides, beginning with the CIB.

Income was up 10% to GBP 3.9 billion. Excluding L&C, operating costs increased by just 2%, delivering strong positive jaws. In total, costs increased by 19%, reflecting the Q1 portion of the provision relating to the over issuance. There was a GBP 33 million net impairment release, reflecting an improved view of the watch list.

Overall, the CIB generated a RoTE for the quarter of 17.1% despite the L&C charge, which impacted the RoTE by around 3 percentage points. Turning now to Consumer Cards and Payments.

Income in CCP increased 10%, reflecting growth across international cards payments and the private bank. The increase in costs was largely due to the L&C charge of close to GBP 200 million. There was also an increase in investment and marketing spend relating to the expansion of the business, including preparations for the GAAP partnership.

The impairment charge was GBP 134 million, reflecting the flow-through to delinquency in U.S. cards. The RoTE was minus 1.5%. But excluding the L&C charge, the RoTE would have been in double digits.

Turning now to head office. The income of GBP 23 million included a one-off gain from the sale and leaseback of U.K. data centers of GBP 86 million. Costs were broadly in line with the usual run rate and the loss before tax for the quarter was GBP 73 million.

Before I move to capital, a quick summary of our liquidity and funding. We remain highly liquid and well funded with a liquidity coverage ratio of 159% and a loan-to-deposit ratio of 68%.

Moving on to capital. The CET1 ratio ended the quarter at 13.8%, comfortably within our target range of 13% to 14%. Our full year results, we flagged the effect of the announced buyback program and the regulatory changes, which took effect on January 1. These 2 elements reduced the year-end ratio on a pro forma basis to 13.9%.

The apportionment to Q4, a part of the charge relating to the overissuance, doesn't affect the headline year-end ratio. However, there was a further 19 basis points impact from the Q1 charges relating to the overissuance and associated RWA moves and a 6 bps headwind from the fair value reserve movements, principally caused by the higher rate environment.

We would expect circa 12 bps of the overissuance impact to reverse when the related hedges are no longer required. Underlying capital generation was strong with 51 bps accretion from profit. This was partially offset by increased RWA deployment as we would expect in Q1.

Looking at our capital requirements. Our MDA hurdle is 11% so we have comfortable headroom at current levels. There are a couple of factors affecting the ratio over the balance of the year that I want to mention.

Firstly, our recent disposal of Absa shares adds around 10 basis points to the capital ratio in Q2. Secondly, we expect to go into the triennial pension valuation as at September 30 in a surplus position, both from an IFRS and a funding point of view.

Given the recent announcement from the PRA on structured contributions, we expect to unwind GBP 1.25 billion of contributions in Q4, which would otherwise have been spread over 2023, '24 and '25 from a capital point of view. Absent other impacts from the triennial, this could bring forward around 30 basis points reduction in the ratio.

I would note, however, that given the surplus position of the fund, the element of our Pillar 2A requirement for pension risk may reduce. Going forward, we are confident in the organic capital generation of the group.

We announced with our annual results in February that we would be launching a GBP 1 billion buyback. In view of our ongoing discussions with the SEC concerning the impact on last year's 20-F filings of the overissuance of U.S. securities, which we announced on 28th of March, we are delaying the execution of the buyback until we have concluded these matters.

To be clear, this isn't a question of whether we will be proceeding with a buyback, but when. And we expect to be in a position to start towards the end of Q2. As we've said previously, the Board considers capital distributions regularly throughout the year. It isn't just a matter for annual discussion as you saw in 2021.

Finally, on leverage, our spot leverage ratio was 5%, and the average U.K. leverage was 4.8%. So, to recap, we reported statutory earnings per share of 8.4p for Q1 and generated an 11.5% RoTE despite the litigation and conduct charges. The business performance is robust, and we're focused on delivering our target of double-digit RoTE this year and on a sustainable basis going forward.

We have an income tailwind from expected balance growth and rate rises in the consumer businesses, and the CIB franchise is in good shape after an excellent Q1 performance. Given the GBP 0.5 billion of litigation and conduct in Q1 '22, the increase in expectations for inflation and the strengthening of the dollar, we have seen some increase in our outlook for costs for this year, but we'll continue to review our expenditure plans and it's early in the year. But overall, we're comfortable with the current consensus of around GBP 15 billion for all-in costs.

Reflecting macroeconomic uncertainty, we have maintained strong coverage ratios and expect the run rate for impairment to be below the pre-pandemic levels over the coming quarters.

Our capital ratio remains strong despite the Q1 L&C charges, and we remain confident of delivering attractive capital returns to shareholders whilst also investing for future growth. Thank you. And we will now take your questions. And as usual, I would ask that you limit yourself to 2 per person so we get a chance to get around to everyone.

[Operator]

[Operator Instructions] Our first question comes from Jonathan Pierce from Numis.

[Jonathan Richard Pierce, analyst]

I've got 2 questions. The first one is just a numbers one. The hedge income looks like it could be pushing sort of GBP 2 billion, random by the time we get towards the end of the year. So can I just invite you to maybe tell us how much of that is actually gained in Barclays U.K. as opposed to CIB, please, that would help.

The second question is a much broader one on these buybacks. Thanks for the clarity that it's a question of when, not if. But could you maybe just set out for us in a bit more detail what exactly needs to be done in the coming weeks to get the GBP 1 billion going? Is it purely the refiling of these 20-S? So is there anything that's more out of your control that we should be thinking about?

And sorry, just a supplementary to that and just maybe jumping the gun a bit. But capital accretion over the rest of the year organically, they should be pretty good as it often is in the last 9 months. I'm just wondering whether you think there's any scope given what's happened in the last couple of months, where there's any scope for the buyback to be topped up later this year, which I think may have been your intention at the full year results.

[Angela Cross, executive]

Okay. Thanks, Jonathan. I will take both of those. In terms of the structural hedge income, approximately 60% of it sits in the U.K. So hopefully, that's quite straightforward. And in relation to the other matter, so as a U.K. matter, we have concluded and agreed with our auditor and the U.K. regulators that there is no need for us to refile either BB plc or B plc in the U.K.

We are deal in ongoing discussions with the SEC in relation to a requirement to potentially or possibly refile B plc, and we have concluded that we will refile BB plc. So you're right, it relates directly to that. And until we've concluded that, we have decided, so it's a Barclays decision, that we will delay the commencement of the buyback. What I would say, Jonathan, is that we're well progressed in our preparation. And in fact, the basis of that restatement is what we've actually printed today with a reattribution back in FY '21, and we've got really constructive discussions with the SEC.

So that's why we've positioned it as we have other as a when rather than an if. And you're right, we're really pleased with the capital print in the first quarter, and we feel like there's momentum in the business and actually across all 3 businesses. So we'll continue to consider our distribution plans for the rest of the year, but we would expect to accrete capital.

We've guided today that we are still continuing to target double digits. So that's about 150 basis points, and we've delivered 51 from AP in the first quarter. So it does feel like the momentum is there, but it's something that we'll discuss with the Board.

Typically, we discuss that throughout the year. It isn't just a matter for the year-end. You saw that last year, and I wouldn't believe it would be different this year.

[Jonathan Richard Pierce, analyst]

Okay. That's really helpful. So just to be clear then. Once these 20-S 1 or 2 have been refiled, buyback will start, we're not waiting to see what the SEC is going to do with regards to potential fines or remedial action and control function, it's literally just the 20-S.

[Angela Cross, executive]

Correct.

[Operator]

Our next question comes from Joseph Dickerson from Jefferies.

[Joseph Dickerson, analyst]

Just a question on the provisioning. I guess if I look at the card coverage in the U.K. that's at 13%, I mean this is like almost an adverse outcome in a stress test. What's driving that level of conservatism given where we are on unemployment rate and household indebtedness and so forth. And more broadly, do you think that you're taking enough risk in unsecured. So 2 topics on unsecured.

And then also on the thing in the same area, could you just comment in terms of what you're seeing in terms of some of the higher frequency spend data? I mean your own monthly Barclay card survey shows areas such as nonessential spending are up like 17% on March of 2019. At some point, you think some of this is going to turn into revolve balances, particularly as travel picks up. Is that a correct assumption?

[Angela Cross, executive]

Yes. Thanks, Joe. I'll take the provisioning. I'm sure that Venkat will have a view on risk and then I'll revert back on the high frequency data.

So when we were at the year-end, we were cautious and we were cautious about a few things. We were clearly cautious because we were at the what would appear to be the Omicron variance, we were cautious also about impending inflationary and affordability pressures.

I would say that since the year-end, our concerns about COVID have abated somewhat. But the tragic events in Ukraine and the ongoing impact of inflation around the world and how that plays into affordability that's probably changed that concern a little.

So we've been cautious, Joe, and that's why we've maintained coverage. You're right, unemployment forecasts are low. But the way I think about unemployment is we use it in the models as a shorthand for disposable income. So even though unemployment forecasts are low, it is absolutely certain that the affordability pressure is out there. And therefore, we will see some pressure on monthly disposable income, and that's why we've taken the position that we have.

Venkat, what about the reposition?

[Coimbatore Venkatakrishnan, executive]

Yes. So Joe, you're absolutely right that, first of all, credit conditions otherwise are relatively benign. Obviously, with these inflation and cost of living pressures and interest rate rises consequently coming from central banks, there is a greater chance today than there was even 3 or 4 months ago that growth gets affected and employment gets affected later on this year.

Having said all of that, especially in unsecured, I would characterize this as a demand problem and not a supply problem. We have a -- we believe we have abundant risk appetite to lend unsecured, both in the U.K. and in the U.S. Obviously, we will do it where it's affordable to our customers and where it makes sense from a creditor's point of view. But credit risk is benign. So we are very much open for business, I'd like to say. And I think what you're seeing is a demand issue.

And we are also anticipating in the U.K. that as discretionary spending or nonessential spending rises into the summer with holidays, that we will see balanced growth. I think the U.K. is a little behind the U.S. in that.

[Angela Cross, executive]

I completely agree with that, Joe. And if we look at our high-frequency spend data, we can see purchases up in credit cards in the U.K. We can see actually payment volumes up when we look at our payments business, payment volumes are or the turnover is 17% up year-on-year.

And actually, when we look back to 2019, which is the last year pre-COVID, our purchase volumes are up versus that as well. So there's definitely a recovery in spending. We continue to see elevated levels of repayment in cards in both the U.K. and the U.S., actually, which is probably some reflection both of consumer confidence and the large liability balances that we've seen accrete through the COVID period.

So I think that will probably form a little bit of a dampening on growth. But essentially, what is happening is what we expected to happen, which is we're seeing purchases as a strong lead indicator, expect to see balanced growth from here and actually lending growth will probably follow that. Okay.

[Operator]

Our next question comes from Rohith Chandra-Rajan from Bank of America.

[Rohith Chandra-Rajan, analyst]

I had a couple, please. One on the CIB and one on costs. I mean, obviously, a great quarter for the CIB in Q1, and congratulations on that. But as Venkat mentioned, the CIB doesn't move in a straight line. So I was just wondering what the sort of market environment you were sort of baking in to support that 10% RoTE for the group for the full year, particularly for the CIB. So market environment for the CIB.

And then linked to that. Just in terms of the controls review, is that specifically around the Structured Products business? Or is it broader based than that? And then the second area would just be -- I wonder if you could just provide a little bit more detail in how you're thinking on cost has changed. So the GBP 600 million to GBP 700 million increase in cost expectations for this year relative to previous guidance, how much of that is incremental litigation and conduct? How much is inflation? How much is performance related? How much is FX? So if you could provide any clarity around that, that would be really helpful.

[Coimbatore Venkatakrishnan, executive]

Thanks, Rohith. I will begin with the CIB and then Anna will cover costs. I think the market environment will continue to be, one, characterized by volatility, both in interest rates, in credit stress and in equities.

I obviously hope and don't anticipate that there will be the kind of severe shock to the system that the Russian invasion of Ukraine created in late February. But I'm thinking about it more like the environment that prevails, let's say, in January up to the Russian Ukraine invasion, and that is probably prevailing right now, now that, that shock has abated. So it is one characterized by higher volatility.

And I think investors and clients -- investor clients and corporations will continue to have to reposition their portfolios dealing with that volatility and form views about how they want to take their risk profile, what they want to assume their risk profile going forward, which is not an easy thing.

More broadly, I think you are beginning to see a little bit of deal activity come back into the market. Obviously, the Elon Musk acquisition of Twitter for which we were an adviser and finance as has been reported has idiosyncratic elements to it. But it is, we think, a harbinger of some improved deal activity, and that will help the banking side.

As far as the controls review itself goes, what's going on externally, which is focused very much on this particular incident. And from everything we've seen so far, there was no intentional misconduct, and it seems to be a relatively specific matter.

Having said that, as I've said before, I take a control culture and a risk management culture extremely, extremely seriously, and I'm very disappointed when I see surprises like this. And so we will do whatever we need to do to ensure that we don't face such surprises. And if that means looking internally at other things, we will. But it is -- the most important thing to emphasize is a no surprise culture and learning from it when it happens. And I'll turn it to Anna on cost.

[Angela Cross, executive]

Okay. Thanks, Rohith. Yes, you're correct. We've guided to GBP 15 billion all-in cost this morning. I want to be clear that, that is a statutory number. So the movement that you are seeing is predominantly around L&C, about 500, I would say, and that that's really what's changed here. And we're clearly disappointed by that.

Let me help you understand how I think about costs. I think of it permanently as us working across 3 different factors. The first is what we invest to underpin the growth of the business. The second is how we drive efficiency programs through the business. And then the third is how we are managing headwinds from inflation and indeed from FX.

What's different again is that the pressures around that third element are certainly higher than they were, although I'd remind you that whilst FX might be a headwind to cost, it's a tailwind for the P&L overall.

Typically, what we try and do is bring the net impact of those 3 as quite [indiscernible] as you can so growth can drop to the bottom line. That is harder in the current environment, which is why we've given that guidance around all-in.

We do have levers, though. And you've seen us be really disciplined in the first quarter. So whilst we've got revenue growth of 10%, we've got operating cost growth of 1% and we got positive jaws in all 3 of the businesses. So you should expect us to continue to be thoughtful and disciplined.

[Rohith Chandra-Rajan, analyst]

Could I just follow up on that, Ann, in terms of the levers. I mean, presumably, that inflationary pressure builds as we go into next year. So I think you talked about the potential deferral of investment spend. Would that be the key lever that you pull to manage a more inflationary environment for a year or two?

[Angela Cross, executive]

Yes. I think there was a few levers. There's such phasing of investments. Now clearly, we'll prioritize the investment that we think is strategically important. That's the right thing for the business.

But we may push out decisions that are a bit more marginal. The second one would be driving efficiency harder. We clearly set off in Q4 of 2021 our BUK transformation, for example. That's not really going to deliver a whole load in 2022. But beyond that -- and that's simply because of the timing of when those investments start. From '23 onwards, you'd expect that start coming through. So obviously, driving efficiency really hard.

And then the third thing is just the timing and extent of any structural cost actions that we may choose to take. We've guided to being -- those being down materially year-on-year. And as we take them, we are thoughtful about the returns of the business at that point in time. So think of us pulling those 3 levers, Rohith.

[Operator]

Our next question comes from Alvaro Serrano from Morgan Stanley.

[Alvaro de Tejada, analyst]

Just a couple of questions. On -- again, on the shelf notes issue and the review from the regulators. Apart from the refining, what do you think the potential range of outcomes could be? And in particular, I'm thinking if they do ask you to reinforce controls, is this a material source of cost inflation that we should potentially sort of have to think about?

And the other sort of question for me is a bit around the consumer, and I'm thinking U.K. But if there's any relevant comment in the U.S., that will be very welcome as well. Obviously, balances are not taking off yet. And the outlook, obviously, you now have the sort of the uptick in utility bills and potentially more in -- later in the year.

With that, you still are confident that it's going to grow. What drives that confidence? And what do you think is sort of has traveled the bigger sort of it still makes you the pickup and travel to, still makes you confident on that despite all the consumer squeeze?

And I'm thinking obviously more in terms of demand and balance growth over the next few quarters, why you set off then?

[Coimbatore Venkatakrishnan, executive]

Thanks, Alvaro. So let me begin on the structured note side and then Anna will cover the consumer balances. So look, first of all, on the cost estimate that we've given you. We've given you our best estimate at this point, which is primarily related to the recession offer itself and the financial risks around it, which we've hedged.

The broader issue of our controls, it's early for me to say. Look, I think we're doing this external review. As I said, there is no -- from what we've seen, there has been no intention on misconduct and it appears to be an isolated manner. We, of course, will internally, as I said in an answer to the previous question, I hate surprises. And when surprises happen, I would like to look more broadly.

But we have spent a lot of time and money on improving the controlled culture of this bank since 2016, and we've done a lot. And if you look whether it's been financial risks or other risks that have been hitting the industry over the last many years. There are many things which we have avoided. So I feel good about what we have accomplished. Obviously, we did not achieve perfection. Otherwise, this would not have happened. So this is upsetting that it's happened.

But I take some comfort in everything that we have done so far, and we will continue to look, as you have to, after one of these things happen. But my hope and expectation is that this is a very specific matter.

[Angela Cross, executive]

Okay. Alvaro, I'll take the question on cards balances in the U.K. and the U.S. They all are different. So let me draw that out.

So in the U.K., we are still confident. The reason for that is because of the trajectory and purchase activity that we see. And you're right, the mix within that, we might expect to tend towards travel as we head into the summer. I think the other thing just to remember is that as we went into COVID, we were risk off. We were conservative. We were cautious as we went into COVID. And that's a decision that we took at the time.

But since then we set back towards consumer risk in the U.K., as Venkat outlined previously. We're doing so in a thoughtful way, given the environment. But over time, us stepping back into the market to acquire cards will feed through into higher balances. So it's partly around purchasing behavior, but it's also that slide, we will affect of stepping back into the market.

The U.S. is completely different. So in the U.S., we've seen balances grow by 2.6 billion in the year. They're up 13%. That's nearly all organic. We're seeing heightened purchase activity there, too. So that gives us confidence in terms of the organic growth of the stakes we already have borrowing on the cards. And then, of course, we had strong acquisitions throughout the back end of 2021 and you're starting to see that now coming on.

Actually, what you see most of right now is the contra income of that, but that will again feed through to balances. And then inorganically, we've got gaps coming on board at the end of Q2 in the U.S. So I think we're constructive in both the U.K. and the U.S. for different reasons, but we'd expect balances to grow in both.

[Operator]

Our next question comes from Chris Cant from Autonomous.

[Christopher Cant, analyst]

If I could just come back on the shelf issuance problem. First, could you explain in a bit more detail what you've done to size the potential impacts here in terms of the provision you've taken. Presumably, these instruments change hands several times. Do you have any obligation to compensate previous owners of the instruments or just the current holders?

I note that in today's release, you've indicated an unquantifiable contingent liability on a subset of the ETN. So when do you think you'll be in a position to quantify that potential risk?

And then secondly, is there a risk of some regulatory fine here? I appreciate that you've indicated this was basically an unintentional error. It's not sort of a risk culture issue. But you have lost your well seasoned issuer status in the U.S. in 2017 then paid a fine. So I guess you're already on the Northeast step, for lack of a better term. Could that be a factor in how the regulator views the recent over-issuance problem?

[Angela Cross, executive]

Okay. Thanks. Chris. What we've put in the financial statements this time is our best estimate at this stage. And you're right, it's focused on the structured notes rather than the ETNs. But we're just calling out that within the GBP 15 billion, the ETNs are GBP 2 billion of that over issuance.

I can't go into detail on the way we've constructed the provision. What I would say is that there are differences in the products and the way that the products trade in the market, the underlying, the reason why we have treated them differently in the way that we called it out. So we are not able to determine if or what any liability would be with the ETNs, whereas with the equity structured notes, they performed differently in the market, and therefore, that's relatively clear.

And as it relates to further discussions with the regulator, Venkat, you want to take that?

[Coimbatore Venkatakrishnan, executive]

Yes. I think the broad framework on this, and obviously, we can't forecast exactly what will happen, but I think the 2 to 3 things importantly to keep in mind.

Number one is we seek at all times to have frank, open, harmonious relationships with our regulators. In that way, this issue has been escalated immediately to them was escalated immediately to them. We have regular discussions, and we're working constructively to resolve it. We have not, in the external review found any evidence yet of internal misconduct, any sign of internal misconduct.

I think all those are contributory. And -- but the ultimate outcome is -- our hope is to resolve this matter appropriately, offering the right remedies on the law to those who have been affected and working constructively with our regulators to end the matter.

[Operator]

Next question comes from Omar Keenan from Credit Suisse.

[Omar Keenan, analyst]

I've got one market question and one Barclays U.K. NIM/structural hedge question. So just on markets. So you talked about improved margins from historically low levels, an environment of business and volatility. And I understand that picture for FICC, and I can see that '22 is likely to be quite good for the franchise relative to last year, especially given the normalization of rates we had last year.

But what I'm trying to understand is how you think the equities business will behave specifically and how volatility dependent do you think Barclays equity franchises versus how directional it is? I'm just trying to understand the likelihood of those businesses performing together as they did in the first quarter.

And then my second question is just on the Barclays U.K. NIM guidance. Could you just give us some color around the specific assumptions behind the revised NIM guidance. I think if we think about the number of Bank of England rate hikes that are now in the base, I think it's probably around 35 to 40 bps on average, something like that. Is that fair?

And just on a question related to the structural hedge. I just wonder how much you're thinking about how to manage the structural hedge given the shape of the yield curve and what you're expecting from interest rates. I'm just wondering if the bias is going to be for yields to head up whether you'd be tempted to shorten digit duration a bit without suffering on yield to increase your year 2 to year 4 rate sensitivity.

[Coimbatore Venkatakrishnan, executive]

Yes. Thanks, Omar. Let me begin with the markets questions, and then both the NIM and the structural hedge, I'll turn it over to Anna to answer.

On the market side, you asked about both FICC and equities, let me say 2 things. First on FICC, there is higher volatility on the trading side. On the equity side as well, I think there has been a period since last year, it's been slightly different things, but it's been increased volatility in the equity market since last year.

At the start of the year, as you remember, it was very idiosyncratic, single stock movements, the mean stock as they call them. It has become more broad-based now with higher interest rates and greater volatility in indices. And I think one way to think about it for us is we have both a strong cash and a strong derivatives franchise, and the derivatives franchise tends to benefit from increased volatility.

And the one thing I'd like you to also keep in mind, both for fixed income and equity, is how much we have been making progress in what I would call financing and financing based revenues, which are a little subject to volatility, but are much more stable fee-like income.

So obviously, equity prime has been a growth area, and we sort of called it out in our slides with a 40% growth over a 4-year period ending in 2021, but even a 10% growth in the first quarter of this year.

And then fixed income financing, of which we are a leading participant in the market, top 3, if not top 2, has been low in absolute revenues for the past number of years with rates being very low, spreads being very low, rate wall and spread wall being very low, but it's starting to pick up with widening credit spreads and higher interest rates.

So I think that combination of financing revenue across equity and fixed income is something we have been strong in, we continue to invest in. And it is fee like income. But in markets like this, I would anticipate that, that continues and some of it is really quite independent of market with franchise revenues.

[Angela Cross, executive]

Thanks for the question, Omar. And so Barclays U.K. NIM guidance, we've guided today that we expect to be between 270 and 280 bps for the year. The key assumption there is we are assuming that we exit the year with a base rate of 1.75%.

And I would say the assumptions within that. Let me tell you about what I think the levers are. The first is clearly that base rate move. And we've seen today, I would say, a little pass-through or low levels of pass-through. I would expect pass-through increase as rates continue to rise.

Of course, it's difficult to call specifics. We've not been on this pathway in the U.K. for quite some time. But in general, I would expect pass-through rates to increase somewhat from here.

The second thing is obviously the structural hedge, and I'll come back to that in a little bit more detail. But obviously, the structural hedge will increase in income terms over time, and that adds to that build in our NIM. And then there's probably one which is a bit more of a dampener, which is obviously what we're seeing in terms of mortgage margins.

The mortgage margins are definitely very competitive. And whilst we like the business and are pleased with our growth, just the mix effect will have a dampening effect on NIM, but obviously, a positive impact on NII in cash terms. The wildcard is really what happens to cards balances. So that one is a little bit more difficult to call.

The thing I'll just say about base rates before I go on to structural hedges. Whilst we're calling that we are using a 1.75% exit rate, the rises in Q3 and Q4 don't really have that much effect on 2022, both because of the timing. And obviously, we're assuming an escalated pass-through as we go on.

Just coming to the structural hedge. And the structural hedge is there to dampen the volatility from interest rates in the U.K. and indeed then generally across our banking products. It's not an expression of how we feel about rates. And to that extent, when we move that hedge around, typically, what we're doing is we're extending it in quantum to reflect higher deposits. We are not doing anything else. So we are not intending to change it in terms of duration at this point.

It's a caterpillar. So 160 of it will reprice every month. So just to reiterate, though, taking all of those things together, we're guiding up on NIM because all of those things are net benefit to the overall income of the U.K.

[Omar Keenan, analyst]

That's all. If I could just ask a quick follow-up question. So you've kept your rate guidance of 275 million for [indiscernible]. Should we take that as a signal that, that will be the rate sensitivity for the next type?

[Angela Cross, executive]

That's a more general disclosure, Omar. That's -- it's difficult to be specific about any particular rate hike, and we would not do that.

It's quite dynamic because of not just the timing of them, so it depends where you are on the curve, for example. But it's also because we're making multiple decisions across different businesses. It will be different in corporate versus the U.K., et cetera. So don't think of it as an expression of improvement, it's a sensitivity.

[Operator]

Our next question comes from Ed Firth from KBW.

[Edward Firth, analyst]

I just had 2 questions, please. The first one was really about credit. I hear what you say about sort of conservatism and caution on the outlook. But if I look on Page 18, you've got your variables that you use for your expected loss computations. In that, you've got U.K. GDP in your base case, you are growing at 5.7% this year and 2.5% next year. And if you look at the probability table below that, you've actually got a probability wait to do better than that.

And yes, I mean consensus is what, it's almost 2% below that for this year and even low again for next. So seems to me you've been quite aggressive and you expected loss assumptions. So I guess my first question would be, am I reading that right? What is the sensitivity, right? If you were to put more of a sort of consensus view of growth expectations in your [indiscernible] how might that affect your expected loss of computation? So that would be my first question.

The second one was really one for Venkat, really a broader strategy question, Venkat. Because I mean I guess now you've had a bit of time in place. One of the frustrations I have with Barclays is if you look at your CIB business, I mean, it's just smashed expectations again and again. And again, this quarter, you're 40%, 50% ahead of what everybody was thinking. And yet you look at the market reaction again today, everybody shrug their shoulders and one [indiscernible].

As a sort of CEO looking at it a fresh, is there anything you can do about this? Do you think? I mean, are you looking at how can you get people to start giving you value for the performance in that business. And I think I don't you've talked in the past about floating some of it off, can you split it up and give us more visibility on the sort of stable underlying earnings because it must be immensely frustrating for you and for everybody who works there that these earnings are just basically ignored.

[Angela Cross, executive]

Thanks, Ed. I'll take the first question and then I'll hand over to Venkat. So on your question around our macroeconomic variables, we didn't update those in the quarter. We rolled them forward from Q4, which is what you're seeing.

And they clearly changed towards the back end of the quarter or I'll be specific, consensus changed towards the back end of the quarter and we didn't update for that. But we don't think that's significant. The reason why I say that is GDP not a big driver of ECL in our models. The one that really matters is the unemployment rate. And actually, if anything, if you look at our unemployment metrics that we are feeding into the models, they are on the conservative side. And really, much of the conservatism that we are pacing here relates to our post model adjustment, and you can see that in the disclosure and actually see that in the way that the coverage ratios. That's why the Stage 2 coverage ratios are elevated because that's where the P&A sits.

So yes, the macroeconomic variables are important. Some of them are more important than others. And I would say that unemployment is the one you should really watch. But our PMAs are a significant part of our post model -- sorry, of our nondefaulted stock levels. So we're pretty comfortable with it. Venkat?

[Edward Firth, analyst]

Sorry, can I just have one quick follow-up on that? I mean you still got a 47% probability weighting for an upside and only a 20% weighting to a downside. I mean, should we expect that to be a bit more cautious as we go through the year?

[Angela Cross, executive]

So the probability weighting is actually a modeled output ad, and we can spend a bit more time with you on this outside of here, if you want. But essentially, it's mathematically derived from the divergence between the scenarios.

So the further apart they are the more -- the lower the probability in simple terms. So it's not an active decision we make. It's actually a mathematical output of the palm place, but we can tie through that in a bit more detail.

[Coimbatore Venkatakrishnan, executive]

Thanks for the second question, Ed. So first of all, what I would like to say is if you take a 5- to 6-year perspective on the bank going back. There were 2 questions about Barclays on the CIB. One was, should we have a CIB? And the second is if we had CIB, would we be any good at it?

On the first question of should we have a CIB, I think the argument which we made in 2016 was that it was an important source of diversification for the bank. And I think the event through 2020 and '21 and in fact early '22 have shown that, that was true.

So I think that question of should we have a CIB sort of, I think, off the table. But equally, because of that, the corollary is that we very much wanted to be part of what this business is about or what Barclays bank is about. The second question if you were -- if you had a CIB, would you be any good at it? I think your own kind words describing our performance.

I would take as evidence that, that question should be moving off the table because I think we are showing that we are actually reasonably good at it. So then the broader strategy question is, well, the question you're asking is, well, but you don't seem to be getting a credit for it in the share price. Well, it has the salutary effect of making me a more patient human being. But beyond that, I think the question really is conversion of the earnings into buybacks and capital return. And clearly, the events of this quarter have delayed that satisfaction just a bit.

And the second is consistency. So I think what you should expect from us from a strategic point of view is to keep to the diversification, to keep to try and producing good earnings, to keep to try with our objective of a decent return of capital to shareholders, and then the story will find it's success.

[Edward Firth, analyst]

But sorry, if I could just come back with just one question. I mean, there must be some elements of that business, which is what I call the sort of core recurring business. I mean, I'll be honest, I've got absolutely no idea what CIB revenue is going to be this year, and I guess you probably don't either. So -- but that does make it very difficult for investors to put any value to it in a meaningful manner. But I guess within the business, there must surely be sort of underlying revenue, which we do know what it's going to make this year, which we could perhaps highlight in some way. Is there something in that or not?

[Coimbatore Venkatakrishnan, executive]

Yes. Yes, so I think there is. So let me try to do it for you in a qualitative way without giving you numbers.

First of all, you've heard us talk a lot about financing. With equity financing and fixed income financing, equity financing is what we call our prime business. This is where we have balances from investors around the world who want to borrow against stock and/or borrow against bonds, and they keep balances with us.

We've shown you that the prime balances in our businesses have grown tremendously, 40%, I think '18 to '21, another 10% in the first quarter of this year. And what that -- those are franchise relationships that endure. And they've happened because we've invested in that business, and we've had some competitors who've exited that business, and we've been able to gain some market share from it. That is one part of the business that is relatively repeatable.

When you think broadly inside the CIB and capital markets, both debt capital markets and equity capital markets, again, they also make a bit quarter-to-quarter, but the size of the capital market has been growing, and we expect that to continue to grow. Expect us to get a certain share, which we hope is an increasing share of that issuance market, and we have been always historically very strong in debt and are getting stronger in equity, and you expect to see that and the associated revenues.

And then there's a part about trading, where again, I think you should expect a certain base amount, which will come every day because portfolios need to be rebalanced, people take new positions and people have to trade and rebalance with people on Wall Street like we -- like us.

And on top of that, there is an element which comes from either very special situations, like the ones we spoke about earlier today, or because of higher volatility in the markets, which means people need to rebalance their portfolios more than they normally do because it's moved because of market movements or because they're taking position.

We're seeing a bit of that now. I anticipate that this year will have a higher level of that volatility simply because of rising interest rates and the adjustments people need to make in their fixed income portfolios and their equity portfolios because of equity volatility. I expect that to be higher this year. Can I tell you what that is 3 years from now? No.

[Angela Cross, executive]

Next question, please. And the next question will be the last one for today.

[Operator]

The final question we have time for today comes from Martin Leitgeb from Goldman Sachs.

[Martin Leitgeb, analyst]

And also congratulations on the strong print today. Just quickly 2 follow-up questions, one on U.K. cards and one on the CIB. And I was just wondering on the U.K. cards, if there's anything specifically to call out for Barclays performance, just it seems like at the market share in terms of credit card balances in the U.K. keeps dropping lower, even though there have been a comment about a year ago about your intention to lean back into the recovery and regain some of the market share last year. I was just wondering how shall we think about the card progression balances going forward. Would that be in line with market that you are roughly contend kind of a market share of around 15%? Or would you also see an ambition to regain some of the market share in U.K. cards?

And secondly, on the CIB. I was just wondering you called out share gains in prime financing. I was just wondering if you could comment how you see the competitive landscape evolving? Are there still opportunities out there for further share gains? Or could you actually see some of that reversing with some of the European banks pushing back in terms of revenue ambitions?

[Angela Cross, executive]

Okay. Thank you, Martin. I'll take the first and then pass to Venkat. So your question is about U.K. cards and Barclay's specific performance. I think the first thing to say is that we are in cards and actually nowhere else, exactly the same.

We are not targeting a specific market share. That is not part of our philosophy. Our performance, I think, reflects the fact that we did step back from risk, we actually stepped back from risk post Brexit, and we stepped back at the beginning of the pandemic. And therefore, as we step back in, the response is not an immediate one. It takes a while for those customers to join us, to start to borrow and so on. So I think we would hope that we'll see balances grow over time from stepping back into that market, but it's not instantaneous.

There is a delay. I think that's what we're seeing now. I think the other thing I would just say is it is our intention over time that we will reshape that business, and you're seeing evidence of us doing that now. So ensuring that we've got products that are focused on spend, not lend. So our Avios product launched in February. Too early to talk about specific numbers, but we're pleased with how that's going. So I think the cards business of the future isn't going to be a replica of the cards business of the past for quite a few reasons. Venkat?

[Coimbatore Venkatakrishnan, executive]

Yes. And Martin, thanks for the question. Look, with our competitors, we take them extremely seriously. We respect them. They are all strong professional banks, and many of them are bigger than us. The -- what I'll say to you is market share gains sort of come in 2 ways. One is if competitors exit a particular area, which has happened with certain products and certain banks. And then the second is more sustainably, how you continue to deal with your clients, the services you provide, the investments you make and your capabilities and the continuity which you have in strategy and client facilitation.

We have been on this journey for a number of years with a consistent investment, a consistent approach to the strategy. We -- our footprint has remained relatively consistent, which is concentrated in the U.S. and Europe and in Asia, building it out slowly, but based in trading centers in Hong Kong, Singapore and India, and serving China on an offshore basis.

There are things which we do. There are things which we don't do. What we do, we try to do really well. And we try to offer enough to customers and deal with them in enough product that they keep coming back to us. So I'm very hopeful that with the team which we have and the investments we make and the consistency in that strategy, that we'll continue to get customers coming back to us, leading, I believe, to market share.

[Angela Cross, executive]

Okay. Thank you, everybody. We look forward to seeing many of you over the next few weeks. In the meantime, take care.

[Operator]

This presentation has now ended.